5 Ways To Break Bad Money Habits

By Bill Losey, Special for US Daily Review

Many of us plan thoughtfully for all kinds of  life goals. Yet many of us spend impulsively, using our money on the moment  rather than saving or investing it for the future. This last recession caused us  to take a second look at where our dollars go. If you seem to be making adequate  money and yet dollars still appear to be slipping away from you, maybe it is  time to break some budgeting and spending habits.

1. First of all, have a budget. Many people live without one – and that includes many  affluent people (and the government!). This exercise is starkly simple, but  might be illuminating: make a two-column chart, with the left column listing  your monthly income and the right column detailing your expenses. Detail them as  best as you can, type and monthly amount. Include your credit card expenses.  This little exercise shows you how much you are spending on essentials and how  much of your income you are assigning to comparative frivolities. Perhaps you  will find some dollars you could reassign to planning for your financial  future.

2. Distinguish needs from desires. Do you need that  material item or merely want it? Slick marketing and advertising leaves many  consumers unable to tell the difference. They run up debts to buy what they  want, rather than what they need. How many of them understand that by borrowing,  they are actually spending away future earnings?

3. Discern the  difference between good & bad debt. Do you know the difference? A  bad debt is a debt you incur on a disposable item or a durable good that will  depreciate. It is a debt on something that has no potential to gain value. You  want to avoid as many bad debts as you can. Of course, there is also good debt –  for example, a mortgage, a business loan or a student loan. These are so-called  “investment debts” that can potentially create value down the road.

4. Educate yourself. Some people are very cavalier when it  comes to spending and saving money. Others are convinced that they will never be  able to build wealth, so they spend their days addressing short-term financial  needs and give no thought to the wealth and income they will need in maturity.  In both cases, the root problem is a lack of education. Those who spend money  like water don’t understand its value; those who shun financial planning and  investing don’t understand its potential. People with greater degrees of  financial education tend to be more rational when it comes to financial  decisions. (Not always, but often.)

5. Set financial goals and take  them seriously. When people educate themselves about money – the ways  to potentially make it, the ways to plan to protect it – they start to see how  the financial world “works” and they tend to explore their own financial  potential. This exploration may lead them to meet with a financial advisor. That  conversation can inspire them to set and plan for specific objectives, and get a  relationship going – a shared commitment to wealth building.  If you  haven’t had such a conversation, today is as good as any day for that to happen.

Bill Losey, CFP®, CSA, America’s Retirement Strategist®, is a highly sought-after advisor, retirement authority, thought-leader, author and national TV personality. Bill has over 20 years experience in the financial services industry and is a Certified Financial Planner practitioner, a Certified Senior Advisor and Certified Retirement Coach.  He is the author of Retire in a Weekend! The Baby Boomer’s Guide to Making Work Optional and publishes Retirement Intelligence®, an award-winning weekly newsletter that reaches thousands of subscribers worldwide. For more information, please visit www.BillLosey.com.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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